02-09-09 Regular Meeting of La Porte Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30,2008 N. Capital Assets 1. Summary of significant accounting policies - Continued Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. Capital assets are defined by the government as assets with an initial unit cost of $5,000 or more and an estimated useful life exceeding two years. Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at their fair market value on the date donated. Repairs and maintenance that do not add to the value of the asset or extend assets lives are recorded as expenses. Interest cost during construction is capitalized when the effect of capitalization materially impact the financial statements. During the year ended September 30, 2008, no interest costs were capitalized. Property, plant and equipment of the primary government, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Buildings Water and Sewer System Infrastructure Machinery and Equipment Improvements O. Compensated Absences 20 years 20 - 40 years 20 - 30 years 4 -10 years 20 years The City's employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon termination or retirement. For all funds, this liability reflects amounts attributable to cumulative employee services already rendered, where the payment is probable and can be reasonably estimated. The current and long-term portions of the governmental fund type liabilities are recorded in the Government-Wide Statement of Net Assets. The proprietary fund type liability is recorded as a liability in the individual proprietary funds since payment of this liability will be made from resources of these funds. Also, for the governmental activities, compensated absences are generally liquidated by the general fund. Policies relating to the accrual and payment of these benefits are as follows: · Vacation - Employees earn from 10 to 25 days of vacation per year. Upon separation, employees are paid for all accumulated vacation leave (up to one and one half times their annual accrual rate). · Sick Leave - Full time 8 hour employees accrue 3.70 hours per pay period. Full time 24 hour employees accrue 5.91 hours per pay period and civil service employees accrue 15 days per calendar year. The maximum sick leave time which may be accumulated by any employee shall be 90 days for regular full time employees. For 24 hour shift personnel, the maximum accrual is 1,152 hours. Civil service employees may accrue unlimited sick leave. The liability for compensated absences at September 30, 2008 is comprised of the following: Vacation Sick Leave Total All Funds Governmental $ 902,082 1,949,205 $ 2,851,287 51 Business Type $ 164,846 244,235 $ 409,081 Total $1,066,928 2,193,440 $ 3,260,368